Friday, June 3, 2011

Higher AOE/COE Standard or Risk The Big Verdict?

Illinois Republicans still plan on attacking workers' compensation in that recently reformed state because the law that was sent to Governor Pat Quinn's office (HB 1698) did not change the standard of causation to qualify for benefits.

Current Illinois case law requires that injured workers prove by a preponderance of the evidence that an injury or disease was accidentally caused or arose out of employment. HB 1698 codified this standard.

Republicans object because as interpreted this standard requires as little as 1% of employment causation to be compensable. They are looking for a more strict standard, and from what I'm reading (in WorkCompCentral this morning, of course), Republicans want a standard requiring proof that an injury or disease was at least 51% caused by work.

Curiously, this morning's news also ran a story on a long shore case where a $6 million dollar liability verdict for an injury that occurred in Illinois turned on whether the employer was a contractor or subcontractor (see "5th Circuit Defines 'Subcontractor' in Published Opinion"). The carrier facing the civil liability, NYMAGIC, argued for subcontractor status because of an exclusion in its policy. NYMAGIC lost its argument.

Now, causation standard and contractor/subcontractor status are not the same, obviously. The point is that if Illinois (or any state for that matter) increases the compensability standard for workers' compensation benefits, then the only recourse if there is any evidence of a negligent employer is civil liability - and as noted above that liability can be very high.

While some questionable injuries or illnesses may end up compensable under a lower threshold standard, one reason why work comp came about was because business wanted to reduce the risk of large civil verdicts.

A review of history demonstrates that it is better to cover those claims under a restrictive risk management system (i.e. work comp) with a loose compensability standard than chance a more expensive outcome in the civil courts. Sometimes you get what you ask for, and then realize you should not have asked for it! Illinois Republicans should take heed.

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